Last year alone, over 500,000 counterfeit car parts en route to Australia, valued at over $5.4 million, were seized during a raid in the UAE. Evidently, counterfeits and their influence on the grey markets plague the global automotive industry. The authenticity of spare parts is critical for vehicular and customer safety — fake parts, such as counterfeit wheels, can put lives at risk. It could further lead to a loss of brand image and major product recalls, setting back automobile manufacturers financially.
Introducing an Immutable Ledger
An effort to distinguish fraudulent counterparts should ideally involve the entire supply chain of automobile parts. Car parts and their vehicular fitment should be completely traceable throughout the product life cycle, right from manufacturing up to warranty claims, to ensure transparency and visibility for all stakeholders. But, the question remains — how do automobile manufacturers overcome this problem?
The answer lies in blockchain.
Blockchain, with its decentralized implementation and security capabilities, brings original equipment manufacturers (OEMs), suppliers, service center operators, dealers, and end customers onto a single network, with information stored at the nodes to validate parts authenticity.
It provides an alternative to existing anti-counterfeiting methods, such as 3D holograms and radio frequency identification (RFID) tags, both of which do not allow decentralized tracking of automobile parts. Automakers can make use of this technology to build a digital platform that verifies and authenticates spare parts, enabling a win-win situation for all stakeholders.
Putting Blockchain in the Front Seat
Blockchain ledgers are unchangeable and, therefore, tamperproof. Every single entry in the ledger contains a cryptographic key. By running an algorithm, one can assess if the ledger has been tampered with. Since blockchain-based ledgers tend to be distributed across multiple stakeholders, the tampered ledger can easily be replaced with the correct version of the ledger.
With the implementation of blockchain, automakers can define a process around sourcing, shipping, warehousing, and receipt generation of parts so that customers and suppliers do not end up buying inauthentic ones. Each and every part is labeled, validated, and reported in the distributed ledger system, thereby preventing counterfeits and effectively recording all parts permanently in the blockchain, while allowing stakeholders to validate.
That being said, restricting counterfeits through blockchain is subject to a number of determinants. The foremost one is having in place a strategic alliance with other stakeholders. A single sign-on network where manufacturers can generate unique identifiers for produced items and register them on ledgers comes a close second. Not only will this enable parties to validate the authenticity of items, but also help them identify if products have been diverted from their original destination, are stolen, or involve fraudulent transactions for that matter.
Blockchain has the potential to change the fundamentals of today’s automotive business models by providing them an opportunity to transform after-sales operations on the whole.
Where else in the automotive industry can blockchain be implemented? Let us know in the comments section below.